Beneficial Ownership Requirements - Confirming the ownership, control and structure of an entity applicant

Beneficial owners are the individuals who directly or indirectly own or control 25% or more of a corporation or an entity other than a corporation. In the case of a trust, they are the trustees, the known beneficiaries and the settlors of the trust. If the trust is a widely held trust or a publicly traded trust, they are the trustees and all persons who own or control, directly or indirectly, 25% or more of the units of the trust.

Beneficial owners cannot be other corporations, trusts or other entities. They must be the individuals who are the owners or controllers of the entity. It is important to consider and review the names found on official documentation to confirm the accuracy of the beneficial ownership information. It may be necessary to search through many layers of information to confirm who are the beneficial owners.

You have to confirm the existence of a corporation or other entity when establishing a new account/policy, and when there is an ownership change for non-registered wealth products, universal life and permanent life insurance products. At the same time, you must obtain and confirm the accuracy. You must also keep records of the information about the entity's beneficial ownership while conducting on-going monitoring.

In this context, reasonable measures to confirm the accuracy of beneficial ownership information would include asking the client to provide documentation, consulting existing files, or searching for the information through publicly available sources. Documents and references that you get to confirm the information (such as the website where you found the information) have to be kept in your records.

You must keep a record of the beneficial ownership information.

The beneficial ownership information that you must obtain differs depending on whether the entity is a corporation, an entity other than a corporation (such as a partnership), a trust, or a widely held or publicly traded trust (that doesn’t meet the exemption requirements).

All beneficial ownership information obtained needs to be recorded on the Identity verification and third party determination for entity owners (4831) form.

If the entity is a corporation:

• the names of all directors of the corporation.
• the names and addresses of all individuals who directly or indirectly own or control 25% or more of the shares of the corporation; and
• information establishing the ownership, control, and structure of the corporation.

The following is an example of ownership, control, and structure of a corporation:

ABC Canada Inc., a privately held corporation incorporated under the Canada Business Corporations Act, carries out a transaction or activity for which you have to verify its identity, triggering your beneficial ownership obligations. You learn that ABC Canada Inc. is owned by John Brown and Green Company Ltd. You discover that John owns 15% of the shares in the company (15 of the 100 total) and that Green Company Ltd. owns 85% of the shares (85 of 100 total). Since Green Company Ltd. owns and controls more than 25% of ABC Canada Inc., you need to find the beneficial owners, who cannot be a corporation or an entity. You inquire further and discover that Tina Grey owns 70% of Green Company Inc.'s shares and her two children, Alex and Lucy Grey, each own 15% respectively. Next, you learn that ABC Canada Inc.'s board of directors is made up of:

• James Lochlin, Chair;
• Jane Smith, Chief Financial Officer;
• Mark Jones,Director;
• Tammy Maki, Director; and
• Lisa Bailey, Director.

In this example you must record:

1. The names of all directors of ABC Canada Inc.:
   • James Lochlin;
   • Jane Smith;
   • Mark Jones;
   • Tammy Maki; and
   • Lisa Bailey.
2. The names and addresses of all of the persons who directly or indirectly own or control 25% or more of the shares of ABC Canada Inc.:
   • The name and address of Tina Grey, who owns 70% of Green Company Ltd. Since Green Company Ltd. owns 85% of ABC Canada Inc.'s shares, and Tina owns 70% of Green Company Ltd.'s shares, Tina indirectly owns and controls more than 25% of the shares of ABC Canada Inc.
3. The information establishing the ownership, control and structure of ABC Canada Inc., including:
   • the ownership of ABC Canada Inc. being shared between John Brown (15%) and Green Company Ltd. (85%);
   • the ownership of Green Company Ltd. being shared between Tina Grey (70%), Alex Grey (15%), and Lucy Grey (15%);
   • the control of ABC Canada Inc. significantly being held by Green Company Ltd. and specifically Tina Grey (who indirectly owns and controls more than 25% of ABC Canada Inc.'s shares);

If the entity is a trust:

• the names and addresses of all trustees and all known beneficiaries and settlors of the trust; and
• information establishing the ownership, control and structure of the trust.

The following is an example of the control and structure of a trust:

A trust carries out a transaction or activity for which you are required to verify its identity, triggering your beneficial ownership obligations. You learn that Robert Jones established a spousal trust for his wife Sue. He transferred assets into the trust and designated Joe Johnson as the trustee.

In this example you must record:

1. The names and addresses of all trustees, known beneficiaries and known settlors of the trust:
   • Robert's name and address, as he is the settlor;
   • Joe's name and address, as he is trustee; and
   • Sue's name and address, as she is the beneficiary.
2. The information establishing the ownership, control and structure of the trust, including:
   • The beneficial ownership information is reflected in the information required to be obtained for the trust:
     • Robert is the settlor and can modify or revoke the terms of the trust;
     • Joe is the trustee and controls the assets in the trust; and
     • Sue, as the beneficiary, is the only person entitled to receive the assets or income from the trust.
   • The structure of the trust, including that it is a spousal trust.

If the entity is a widely held or publicly traded trust (that does not meet the exempt requirements)

• The names of all trustees of the trust;
• the names and addresses of all persons who directly or indirectly own or control 25% or more of the units of the trust.
• information establishing the ownership, control and structure

If the entity is other than a corporation or trust (e.g. partnership):

• the names and addresses of all individuals who directly or indirectly own or control 25% or more of the entity; and
• information establishing the ownership, control and structure of the entity.

The following is an example of ownership, control and structure of an entity that is neither a corporation nor a trust:

Rainbow Services, a partnership, carries out a transaction or activity for which you have to verify its identity, thus triggering your beneficial ownership obligations. You learn that Howard White and Betty Green are the two partners in this partnership. Betty is the general partner and is responsible for operating the day-to-day operations and Howard is the limited partner who has invested funds into the partnership. All decisions related to the partnership must be unanimous, and either partner can decide to end the partnership.

In this example you must record:

1. The names and addresses of all persons who directly or indirectly own or control 25% or more of Rainbow Services:
   • Howard and Betty's names and addresses, as the partners who equally own and control the partnership.
2. The information establishing the ownership, control and structure of Rainbow Services, including that:
   • the ownership and control of Rainbow Services is held equally between Howard (50%) and Betty (50%), the structure of Rainbow Services, including that it is a partnership between Howard and Betty, and
   • any other structure details about Rainbow Services, including any organizational chart

If the entity is Not-for-profit organization

• Determine whether or not that entity is a registered charity for income tax purposes and keep a record to that effect. To make this determination, you can ask the client or consult the charities listing on the Canada Revenue Agency website.   
• If that entity is not a registered charity, determine whether or not it solicits charitable financial donations from the public and keep a record to that effect. To make this determination, you can ask the client.

You must confirm the accuracy of the beneficial ownership information that you obtain and keep a record of the documents in all cases.

Examples of documents to confirm the accuracy of the beneficial ownership information include, but are not limited to, for Corporations and or other entities:

• minute book,
• securities register,
• shareholders register,
• articles of incorporation,
• annual returns,
• certificate of corporate status,
• shareholder agreements,
• partnership agreements,
• board of directors' meeting records of decisions, or
• other supporting official documents (including corporate searches that include beneficial ownership information on specific provinces).

Note: Some documents listed above may not include information about the beneficial owners. You must review the documents to determine if they do.

In the case of a trust, you can confirm the accuracy of the information by reviewing the trust deed.

In the case of a not-for-profit organization is a charity registered with the Canada Revenue Agency you can consult the charities listing on the Canada Revenue Agency website.

In the case of an estate, you can confirm the accuracy of the information by reviewing the Will or court order.

If you are unable to obtain the beneficial ownership information to keep it up to date in the course of the ongoing monitoring of business relationships, or to confirm its accuracy when it is first obtained, or during the course of ongoing monitoring, then you must:

• take reasonable measures to verify the identity of the entity's chief executive officer or of the person who performs that function; and
• apply the special measures for high-risk Clients, including enhanced ongoing monitoring

Exemptions to beneficial ownership requirements

If the Client is exempt from verification of identity requirements, then the beneficial ownership requirements as described above are also exempt. Refer to the 4831-I document.